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Improving the Accuracy of Economic Measurement with Multiple Data Sources: The Case of Payroll Employment Data

Tomaz Cajner, Leland Crane, Ryan Decker, Adrian Hamins-Puertolas and Christopher J. Kurz
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Christopher J. Kurz: Board of Governors of the Federal Reserve System (U.S.)

No 2019-065, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper combines information from two sources of U.S. private payroll employment to increase the accuracy of real-time measurement of the labor market. The sources are the Current Employment Statistics (CES) from BLS and microdata from the payroll processing firm ADP. We briefly describe the ADP-derived data series, compare it to the BLS data, and describe an exercise that benchmarks the data series to an employment census. The CES and the ADP employment data are each derived from roughly equal-sized samples. We argue that combining CES and ADP data series reduces the measurement error inherent in both data sources. In particular, we infer "true" unobserved payroll employment growth using a state-space model and find that the optimal predictor of the unobserved state puts approximately equal weight on the CES and ADP-derived series. Moreover, the estimated state contains information about future readings of payroll employment.

Keywords: Big data; Economic measurement; Labor market; State-space models (search for similar items in EconPapers)
JEL-codes: J2 J11 C53 C55 C81 (search for similar items in EconPapers)
Date: 2019-09-05
New Economics Papers: this item is included in nep-big and nep-ore
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https://www.federalreserve.gov/econres/feds/files/2019065pap.pdf (application/pdf)

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Chapter: Improving the Accuracy of Economic Measurement with Multiple Data Sources: The Case of Payroll Employment Data (2019) Downloads
Working Paper: Improving the Accuracy of Economic Measurement with Multiple Data Sources: The Case of Payroll Employment Data (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-65

DOI: 10.17016/FEDS.2019.065

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